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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of DaVita Inc was -1.05. The lowest was -3.44. And the median was -2.59.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of DaVita Inc for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 1.0393||+||0.528 * 1.033||+||0.404 * 1.0199||+||0.892 * 1.0699||+||0.115 * 1.007|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0251||+||4.679 * -0.0583||-||0.327 * 1.009|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $1,917 Mil.|
Revenue was 3715.742 + 3730.576 + 3717.651 + 3581.136 = $14,745 Mil.
Gross Profit was 1019.993 + 1032.947 + 1046.626 + 998.803 = $4,098 Mil.
Total Current Assets was $3,980 Mil.
Total Assets was $18,741 Mil.
Property, Plant and Equipment(Net PPE) was $3,175 Mil.
Depreciation, Depletion and Amortization(DDA) was $720 Mil.
Selling, General & Admin. Expense(SGA) was $1,593 Mil.
Total Current Liabilities was $2,696 Mil.
Long-Term Debt was $8,947 Mil.
Net Income was 157.726 + 571.332 + 53.382 + 97.434 = $880 Mil.
Non Operating Income was 0.667 + 1.876 + 3.215 + 2.976 = $9 Mil.
Cash Flow from Operations was 482.182 + 535.623 + 516.637 + 429.002 = $1,963 Mil.
|Accounts Receivable was $1,724 Mil.
Revenue was 3533.589 + 3525.665 + 3434.618 + 3287.965 = $13,782 Mil.
Gross Profit was 1018.458 + 1024.65 + 988.542 + 925.353 = $3,957 Mil.
Total Current Assets was $4,503 Mil.
Total Assets was $18,515 Mil.
Property, Plant and Equipment(Net PPE) was $2,789 Mil.
Depreciation, Depletion and Amortization(DDA) was $638 Mil.
Selling, General & Admin. Expense(SGA) was $1,452 Mil.
Total Current Liabilities was $2,399 Mil.
Long-Term Debt was $9,001 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(1917.302 / 14745.105)||/||(1724.228 / 13781.837)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(3957.003 / 13781.837)||/||(4098.369 / 14745.105)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (3980.228 + 3175.367) / 18741.257)||/||(1 - (4503.28 + 2788.74) / 18514.875)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(638.024 / (638.024 + 2788.74))||/||(720.252 / (720.252 + 3175.367))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(1592.698 / 14745.105)||/||(1452.135 / 13781.837)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((8947.327 + 2696.445) / 18741.257)||/||((9001.308 + 2399.138) / 18514.875)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(879.874 - 8.734||-||1963.444)||/||18741.257|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
DaVita Inc has a M-score of -2.64 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
DaVita Inc Annual Data
DaVita Inc Quarterly Data